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Session #3 Finding Relative Strength/Weakness

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Legal Disclosure

• Trading Currencies may involve high risk and, potentially, the loss of any funds invested.

• Investment information provided may not be appropriate for all investors and is provided without respect to each individual investor’s personal financial situation, investing time horizon, risk tolerance or financial sophistication.

• Trading decisions are up to you, so Maverick Management LLC, Maverick FX Trading and Maverick Trading makes no guarantee or representation as to the outcome of your decisions.

• Neither Maverick Management LLC, Maverick FX Trading and Maverick Trading ,

nor any of its respective officers, personnel, representatives, agents or independent contractors are registered investment advisors, registered broker-dealers or licensed financial advisors.

• We have created this workshop course as part of an investor education program. Nothing contained in this communication (written, verbal and non-verbal) or other materials constitutes a solicitation,

endorsement, promotion, persuasion, recommendation, suggestion or offer by Maverick Management LLC, Maverick FX Trading and Maverick Trading or others described above of any particular investment, security or transaction.

• Maverick Management LLC, Maverick FX Trading and Maverick Trading does not provide investment or financial advice or make investment recommendations. Maverick Management LLC, Maverick FX

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Session #2 Review

• Forex Market Terminology

–PIPs, Spreads, Long vs. Short

• Currency Crosses

–Dominant Pairs

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Time Frames

• One of the most difficult things

for traders is to understand the

concept of time frame

• Two traders on opposite sides

can both be right or both be

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Time Frame Example

Trader #1 – Short Term Long at 96.20

Sells in 1 hour (4 candles) Trader #2– Short Term Short at 96.20

Buys in 1 hour (4 candles) Trader #3– Longer Term Long at 96.20

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Time Frames

• What time frame do you want to

trade?

• What time frame fits your

schedule/lifestyle best?

• What time frame fits your

personality best?

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Time Frames

• Short Term (scalper)

–Avg. Holding time 5-60 minutes

• Intermediate Term (swing trader)

–Avg. Holding time 1-24 Hours

• Longer Term (Position Trader)

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What time frame is best for you?

• We don’t know the answer

• Use the trading personality test results

• Try different trades on the

simulator/trading demo

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Relative Strength & Weakness

• Relative Strength and Weakness is the

theory that you must measure against

something to determine strength

• We will attempt to list all currencies

from strongest to weakest or First

through Last

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Major Currencies of the World

Currency Name

ISO abbreviation

Return vs USD Today

Euro dollar

EUR

+.35%

Great British Pound

GBP

-.25%

US dollar

USD

+.00%

Swiss franc

CHF

-.17%

Japanese yen

JPY

+.56%

Canadian dollar

CAD

+.29%

New Zealand dollar

NZD

-.57%

Australian dollar

AUD

-.14%

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Relative Strength & Weakness

• Several Ways to determine Ranking

–Quotes

–Charts

–Relative Strength Calculator

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Relative Strength & Weakness

• Quotes

Easiest way is

to list all JPY

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Relative Strength & Weakness

• Charts

Compare

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Why do we focus on Relative Strength?

• There are hundreds and hundreds of

research studies done on trend

following/buying the best performers

• Studies show you can statistically gain an

edge by buying an outperforming asset

• The weakest assets historically

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Trend Analysis

• Countless research has shown that

what has happened in the past has

statistical relevance to future

performance. Some studies:

– A Century of Evidence on Trend

Following – Hurst, Ooi & Pedersen

– Trend Following – Covel

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Momentum Study

• Momentum Study

– Jagadeesh & Titman

• Study Included all stocks traded on the

NYSE, NASDAQ and AMEX between

1965-1998

• Study looked at buying the stocks with the

highest returns over the past 6 months and

measured the return over the next 6

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Momentum Study

• Findings were the top performing stocks tended to

outperform the overall market by 40 basis points

• The top 10% of stocks beat the bottom 10% of

stocks by 123 basis points

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Conclusion/Next Steps

• Browse and Watch Advanced Concept Videos

– Relative Strength and Weakness Calculator

(49 Min)

• Continue with Forex 101 and complete the tests

• Continue the process of building your trading plan

– Work on Time Frame Question

• Practice Determining Strength/Weakness

– Play with Calculator

References

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